Swiss banking institution UBS has reached an agreement to pay $1.4 billion (£1.1 billion) to settle fraud allegations in the United States that have their origins in the 2008 financial crisis.
This resolution marks the conclusion of the final case pursued by US prosecutors who were investigating the behavior of banks leading up to the crisis, an event that triggered a worldwide economic downturn.
According to prosecutors, the bank had provided false information about the quality of mortgages that were bundled and sold to investors through a series of transactions that occurred between 2006 and 2007.
While UBS did not formally admit or contest these allegations, it acknowledged that it had already allocated funds to address this "legacy" matter. The settlement is expected to address all civil claims against the bank in the US.
Earlier, the bank had attempted to have the lawsuit thrown out, asserting that prosecutors had not provided proof of deliberate fraudulent actions.
The lawsuit, initiated in 2018, saw US prosecutors asserting that the Swiss bank had deceived investors in relation to the trade of mortgage-backed securities over a decade ago.
Ryan K Buchanan, the United States Attorney for the Northern District of Georgia, stated that UBS' behavior had played a substantial part in contributing to a financial crisis that inflicted harm on countless Americans.
"The magnitude of this settlement should serve as a cautionary message to other financial institutions, regardless of their size, about the substantial penalties that can ensue when corporations misrepresent crucial information to investors, eroding trust within our public markets," he emphasized.
UBS, a prominent global investment bank, becomes the eighteenth entity to arrive at a settlement in the United States concerning its role in the 2008 crisis, according to statements from prosecutors.
These agreements have collectively resulted in penalties exceeding $36 billion, encompassing major banks worldwide, as well as ratings agencies and other entities.
In comparison, U.S. banks such as JP Morgan and Bank of America have concurred to pay considerably larger sums than UBS.
The financial crisis of the late 2000s was significantly ignited by global banks' exposure to problematic US mortgages during the early 2000s. This exposure played a pivotal role in triggering the crisis, resulting in a substantial global economic downturn and the severest recession in the United States since the Great Depression of the 1930s.
The unanticipated losses incurred due to these loans put immense pressure on the financial system and ultimately led to the collapse of several major banks, including Lehman Brothers in the US during 2008.
Prosecutors have alleged that banks exacerbated the crisis by engaging in illicit mortgage lending, a phenomenon that propagated throughout the broader financial system due to widespread trading of securities backed by mortgages.
